Workers' compensation fraud costs the insurance industry $5
billion every year, according to the National Insurance Crime
Bureau in Palos Hills, Illinois, an organization that investigates
insurance fraud. "The hidden cost of workers' compensation
fraud is the higher premiums and the way it slows down the process
for everyone," says J.C. Benton of the state-run Ohio Bureau
of Workers' Compensation Fraud Division in Columbus. Benton
notes that of all workers' compensation claims, 5 percent to 15
percent contain some element of fraud.

"Fraud is pervasive, whether from faking an injury or
exaggerating the extent of an injury," agrees Gregory Blaies,
an attorney in Ft. Worth, Texas, who defends employers and
insurance carriers in workers' compensation cases. Blaies has
seen cases of people living off the system who, by age 30, have
racked up a dozen claims with a dozen different employers. Lower
back problems and other soft tissue damage is easy to fake and
difficult to disprove. Most doctors are sympathetic to patients who
appear to be in pain and are more inclined to prescribe time off
from work than to declare there's nothing wrong and risk a
malpractice suit should an injury worsen.

Although your business could be the target of a scam artist who
takes a job intending to fake an injury, a problem is more likely
to come from a worker who gets hurt playing football on Sunday and
files a claim alleging injury at work Monday morning. Even more
common, Blaies asserts, is the worker who actually is injured at
work but exaggerates the extent of the injury. After being home for
several weeks drawing disability pay, many employees adjust to
their new lives and find it easier than working.

"A worker who's off work longer is less likely to come
back," Blaies says. "The less contact with the employer,
the less likely the employee will feel wanted and needed."
When an injured worker fails to return, you not only lose
productivity, you face the cost of hiring and training a
replacement. And the more money your workers' compensation
program has to pay in claims, the higher your premiums will be next
year.

Fortunately, there's a lot you can do to investigate
injuries, stay on top of the process, and help injured workers get
back to work. "It's one of the few tax and insurance costs
employers can keep down," says Bill Werther, professor of
management at the University of Miami. Careful follow-up can also
keep scam artists at bay. "If the message gets out that `This
employer doesn't follow up,' you're more likely to be
the target of fraudulent injuries," Werther says.

One key is to recognize that despite the prevalence of fraud,
there are plenty of legitimate injuries. Employees who've been
injured and then treated badly by their companies are more likely
to see a lawyer to get even. "The prevailing attitude in a lot
of companies is that if you file a workers' compensation claim,
you're dirt," says Blaies, who contends companies need to
be less adversarial and more supportive. Investigate the accident
promptly, but treat the worker as a valued employee.

Safety Valves

Step one in keeping workers' compensation costs down is
avoiding accidents in the first place. "Employers with very
good safety programs can go a year or two with no injuries,"
says Blaies. Be sure workers know how to use equipment correctly
and how to lift without back strain. Keep machinery in good repair
and work areas free of spills and debris. Establish a reward system
for achieving a given number of injury-free days. When employees
feel like they're part of a team, they're less likely to
fake or exaggerate injuries.

When someone gets hurt, you have two tasks: first, to take care
of the injured worker, and second, to investigate the accident.
Have a policy that employees should report injuries immediately to
the employer, even though the workers' compensation system
typically gives them 30 days to file a claim. By the time 30 days
have elapsed, co-workers are likely to forget what happened, making
investigation difficult.

When an employee reports an injury, have his supervisor drive
him to the doctor, make sure he gets proper care, and find out how
the injury is likely to affect his work. How much leave does he
need? Will he soon be capable of doing a different job, if not his
regular one?

If the doctor prescribes medication, Blaies advises supervisors
to take the employee to the pharmacy and, if needed, pay for the
prescription (seek reimbursement later from the workers'
compensation program). In some cases, the injured worker won't
be able to use his regular medical insurance unless it also covers
workers' compensation injuries. "If he can't pay for
it, he'll get a lawyer," Blaies says.

Meanwhile, investigate the accident. Contact the insurance
carrier immediately; if the carrier does not send an investigator
right away, conduct a preliminary investigation yourself.

Bring in several co-workers to ask for their version of the
accident. Could it have happened the way the injured worker says it
did? Take notes. Scam artists typically engage
"witnesses" to verify their tales of woe, so beware of a
co-worker who seems overly eager to play witness.

It's best not to talk to the injured employee or witnesses
who may be favorable to the injured employee about whether a
workers' compensation claim will be filed. You could later be
accused of trying to intimidate the worker into not filing a claim
or witnesses into giving false testimonies.

If the injury appears legitimate, ask your insurance carrier to
treat it as a valid claim. Otherwise, the carrier is likely to
treat it as suspect, which could upset your valued employee.
"Don't treat it as being out of your hands," Blaies
says. You want your employees to understand that the company cares
about them.

Following Up

"The biggest employer error is not knowing what's going
on in the hospital and when the employee will be able to
return," Werther says. It's easier to decide that a back
problem is a permanent disability when no one from the workplace
seems to care. Instead, Werther and other experts recommend calling
the employee several times each week with updates on how things are
going at work and questions about how the employee is doing and
when she'll be able to return.

"You'll see the person's mood shift
significantly," Blaies says. It's especially helpful
psychologically if the person doing the follow-up is the
employee's immediate supervisor, not someone in the personnel
department. That makes the employee feel needed--and less likely to
file for total disability.

Likewise, Werther recommends staying in touch with the doctor,
who may be someone hired by the insurance company to assess the
employee's progress. If the employee is better but not fully
recovered, ask when she will be able to do modified work.

As soon as possible, get the employee back to work. If
necessary, create a short-term, modified position the person can do
while recovering, whether it's part time or less rigorous than
the normal job.

These steps not only keep down your workers' compensation
costs, but they also help make the most of your investment in your
employees.

Steven C. Bahls, dean of Capital University Law School in
Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane
Easter Bahls specializes in business and legal topics.